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Gain your financial independence

It would be incorrect to say that just because someone is a creative person, say a musician or a sound engineer, he/she knows nothing of SAvings. This article helps reinforce the concept of savings in a completely different light. This is to help you be financially stronger in a crisis situation like the ongoing Covid times and the new normal thereafter. Of course, there is no foolproof plan nowadays.

But just like the SAying states,save for a rainy day“, there is no harm in building a safety net – in both good and bad times. Read on, for your own sake.

A NEW definition of SAvings

  • Savings is the process of giving up your immediate pleasures for greater (or more important) fulfilment in the future.

  • Savings is sacrifice.

Expense = (Income – Savings) and it is NOT Savings = Income-Expense.

Definition of Investment

Investment is a process by which you acquire something tangible (or intangible) with the goal of benefiting in the future.
Some examples

  • Investment can be a monetary investment, or an investment in knowledge/skill, or an investment in relationships too!
    Action today for a future result is an “investment”.

  • Monetary investment can be in financial assets like equity shares, Bank FDs, debentures, government securities, mutual funds, etc.

What is Wealth?

  1. Wealth is that intangible thing that sets you free! Wealth can be knowledge, emotional wealth, money, relationships or even health. Its definition differs from person to person.

  2. Wealth is relative. There is no level at which one can be considered wealthy.

  3. Also, wealth is comparative. You need to have more of what you are comparing to than the person being compared to.

  4. In monetary terms, wealth can be that level of money that generates sufficient amount of resources to take away the “need to work to earn” concept from your life. You can do whatever you want to, without the overhang or worry of income generation. THAT is an awesome feeling to experience.

In short, wealth sets you free.

Here are some SAving options:

1. Bank FD

  • A Bank Fixed Deposit (FD) is the simplest form of savings which has been done for decades. A bank FD is good for just protecting your money because the returns you get post tax just about equal to inflation adjustment.
  • The money does not grow in terms of purchasing power.
  • Can be used for the short term needs.

2. Public Provident Fund (PPF)

  • Provident Funds carry a fixed rate of interest which is guaranteed by the government.
  • Also, there is a lock-in period of 15 years.
  • The interest earned is tax free, and you also get a tax benefit under section 80C, similar to what you get in life insurance policies. As the interest is tax free, the returns are good and PPF can be considered as a method for both investment and also for tax benefits.

3. Mutual Funds (MFs)

  • One of the simplest and most efficient ways of investing in shares (stock market), for people who have a different occupation than full time study of companies and balance sheets.
  • Mutual funds invest in debt or equity shares, or in a combo of both debt and equity shares.
  • Mutual funds are useful to earn inflation beating returns and for wealth creation.
This requires two things to make money – some investment capital to start with, AND patience. Well, lots of patience actually, as the equity markets are volatile that go up and down in the short term, but do give good returns over longer periods.


4. Gold

  • A traditional asset class that is used for savings, and not investments, because this is something which we don’t sell. We just keep buying it and hoarding it. Consider gold as a hedge for uncertainties. It is more like an insurance policy.
  • Returns from gold over long periods are around FD rates.
  • Should have in your portfolio, but only to an extent as an hedge for bad (or desperate) times.

5. GST SAvings!

Now what is this?! As a freelance musician or sound engineer, a GST registration is an additional saving for you. How? Any business purchase made by you with your GST details mentioned on the invoice will add to your input credit. Such eligible amounts should then be adjusted against the GST output raised in your own invoices. For details, read the #SAvings articles by CA Maulik Desai on GST benefits here

Therefore, buying work related products – studio hardware, original software or accessories – in India from authorised dealers will give you not just warranty but a big money advantage in this GST regime. Know about how much you end up saving by buying music software locally in India here

Just a tip: Buying an iPhone 12 or iPad Pro or the latest iMac from the Apple India store will not give you the GST input credit! That amount will go as a loss. Hence, support local stores selling the same stuff with your GST billing and add to your SAvings.

“To buy or not to buy…?”

A musician uses this phrase often, “i am like a kid in a candy store.” So that itch to buy, say a new synth that has just been released, should be done with careful thinking. Yes, one may feel then, “What am I earning for?”. If any purchase for work (or even pleasure) enhances your music production or recording quality, then just don’t think twice. Go for it indeed.

“Once we go up the ladder, should i buy that <xyz> luxury car i always wanted?”

Yes! You should buy that dream luxury car or bike of yours. If we don’t spend and all of us start saving all the time, life will come to a stop. That is what has currently happened globally in the Covid times. Only when a person spends on a product or a service, that money goes into the economic cycle. The banks earn EMI interest, the dealership can pay a salary, and the Government gets taxes of 50% from each litre of fuel consumed.
Somebody’s expense is somebody’s income.

Just consider the math in this example:

  • A loan of 40 Lacs for a luxury car for 6 years has an EMI of 72,000.
  • Alternatively, if you invest the same amount as an SIP over 6 yrs in a good Mutual fund, you would have Rs. 76 Lacs at a modest 12% ROI.
  • Your car would go for resale for about 15 Lacs (hopefully) after 6 yrs of use.
  • Therefore, the cost of financial ownership = Rs. 61 Lacs for the car, excluding fuel+repair+insurance++ expenses

But hey! Your <xyz> luxury car does give prestige, happiness, the pleasure of driving, envious glances, and an image of having arrived in life.

It’s up to you to decide whether the price is worth it. If it is, please go ahead… OR reconsider, and then RECONSIDER AGAIN some more. Take advice from a financial consultant to get better numbers. But finally, YOU are the BOSS. It is your hard-earned money. Make an informed decision.

The importance of SAvings

The importance of savings and regular, disciplined investments is underestimated by most of us. Please remember that we have a short working life and a long biological life after that. In the creative field, work life is even tougher, as there is always that next young musician, music producer, or sound engineer ready to replace an individual, sometimes at half the cost.

Moreover, in our country, we lack a social security system. Therefore, we need to provide for ourselves all along. The royalty system like IPRS once established and when it works the way it is supposed, can surely be a retirement plan for those in the top bracket.

Just think of SAvings like the story of The Ants and the Grasshopper. The ants worked throughout the summer storing food for winter. The grasshopper played and enjoyed all that time. When winter came (as it always did), the grasshopper had to beg for food. The ants were secure on that front at least.

Have you provided for yourself and your family when your earnings stop (or even pause for a while)? Have you saved for your winter yet? Currently, in a pandemic time like Covid, many of us happen to be in this situation. If your answer is in the affirmative, do play away… ELSE start SAving today.

The “likes” we get on our videos motivate us to continue creating.  But ultimately, the whole thing is that ke bhaiyya sabse bada…

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